Common approaches by mnmgroup


									                      Subject: -
                  Management of

                    Project on: -
Commonality approach in respect of Co-
   operative & Corporate Sectors and
  specific problems related to the Co-


Sr No           Contents                    Page No
01      What are co-operatives? and         01
02      Introduction of co-operatives       02-09
        And common approaches between co-
        operatives and corporate sectors.
 03         Problems of co-operatives                         09-12

 04         Remedies of the problems of co-                   12-13

 05         Conclusion                                        13


What are co-operatives?
Co-operatives are organizations that are owned, controlled and used by their
members. They exist to deliver benefits and welfare to their members. They can be
structured so that the profits are put back into the co-operative or distributed to
members. Co-operatives are regulated and supervised by the Office of Fair
Trading's Registry of Co-operatives and Associations.
The Registry of Co-operatives & Associations regulates two types of co-operative
organizations. The first types are those registered under the Co-operatives Act
1992 and the second types are those registered under the Co-operative Housing &
Starr-Bowkett Societies Act 1998.

The International Co-operative Alliance (ICA), an independent, non-government
association established in 1895, which unites and represents co-operatives
worldwide, has given the universally accepted definition of a co-operative as

“…an autonomous association of persons united voluntarily to meet their common
economic, social and cultural needs and aspirations through a jointly-owned and
democratically-controlled enterprise”.

Co-operatives are people-centered businesses which are member-owned, member-
controlled and member-used. They are distinguished from other forms of
incorporation by their participative ownership, their democratic structure and their
use of capital for mutual rather than individual benefit.

As co-operatives are integral part of economy, they have a lot in common with
corporate bodies. A co-operatives organization operates on the lines of the
Corporate sector. In a professional approach, an organization is a structure
managed by a group of individuals who work together towards a common goal. Let
us explore the common approaches co-operatives and corporate share:

The main aim of a business is to earn surplus revenue, and satisfy its
members i.e shareholders. A business operates within both an external
and an internal environment (micro and macro environment).
  A co-operatives main aim is to serve the needs of its members and to
earn excess (surplus).
 A corporate body has to earn a profit so as to satisfy its shareholder.

An organization’s primary role is to maintain good relation with its
stakeholders, which include suppliers, dealers, retailers etc.. stakeholders
are the backbone of any business.

   A co-operative has to maintain good relation with its stakeholders,
which include raw material suppliers, distributors etc., to transfer its
products from rural to urban markets. It all depends on the distributors,
as the channels are lengthy.
  A corporate also has to maintain good relations with its stakeholders-
its stakeholders include suppliers and distributors as well.

An organization has to operate within its functional areas, and also
within the industry as a whole. There are a lot of similarities between
cooperatives and corporate with regards to the area of operation. It is
also known as area of operation.

  They operate in sectors like banking, sugar, electricals, healthcare,
fertilizers, food processing etc,
  Corporate also operate in similar sectors; their operations, however,
are on a larger scale compared to co-operatives.

An organization has to be professionally managed in order to conduct
business effectively, and in a professional manner. In order to ensure the
above, the board of directors appoint managers who help in the day-to-
day functioning of the organization.

  The members in a co-operative appoint the managing committee, who
in turn appoint the chairman.

In the corporate world, the owners (the shareholders) appoint board of
directors, who appoints a CEO, who in turn appoints the chairman.

A good leader is the driving force behind an organization’s success. He
is the main proponent in decision-making processes, generating new
business ideas, etc.

 A leader is a visionary, a motivator, a major influence- his main job to
motivate people to join the co-operative sector is Dr. Varghese Kurien.

 The leader in a corporate is a strategist and a decision maker, like
Narayan Murthy.

In both corporate and co-operatives, the leader plays an important role in
the business.
Meetings take place in an organization for various purposes such as
planning, the organizing the future course of action, and effectively run
the enterprise.

 There are many types of meetings held in co-operatives-Statutory
meeting / First General Meeting, Annual General Body Meeting,
Special/Extraordinary Meetings.

  Corporate hold a series of meeting like the Annual General Meeting,
Statutory Meetings, EOGM, BOD Meetings, Crisis Management
Meetings etc., to discuss important issues related to business.
  Meetings are an integral part of both the co-operative and the
corporate world.

All businesses are accountable to their owners (members/shareholders);
without accountability, an organization cannot prosper, and become
  Co-operative is accountable to its members, and has to provide better
returns on their investments. Moreover, it has to provide society wit high
quality products at reasonable prices.

 Corporate are accountable to their shareholder, and to society at large.

An organization has to register itself with the Registrar of the Industry.
Only after registration can an organization form a business that provide
the guidelines and framework within which it has to operate. The
committee generally formulates policies in accordance to standard
format developed by the Registrar of the Organization.
 Every co-operative has to Registrar of Co-operatives.
 Every corporate has to register itself with the Registrar of Companies.
It’s only after registration that an organization becomes a legal entity.
Registration gives birth to an organization. Both co-operatives and
corporate have to operate according to the policy framed by their
concerned organization.

An organization’s main motive is to make a profit, and to provide for
social welfare. Every organization has to perform some social activity in
accordance with company rules.

  Co-operatives mainly operate in order to provide welfare to their
members and to society, by providing the latter with quality goods and
services at very reasonable prices, by organizing welfare programmes,
by using the environment friendly technology, and by providing
employment opportunities.

  Similarly corporate also perform welfare activities by organizing
festivals in village, providing employment opportunities, quality
products, proper remuneration, good working conditions and fair returns
on investments, and making proper use of funds.

Regulatory Bodies
There are many regulatory bodies that govern the workings of specific
sectors like software, textiles, dairy, steel, etc. These bodies generally
lay down the rules and regulation of running an organization. They also
provide guidance to certain companies.

  Many regulatory bodies have been formed to control, promote, and
develop the co-operatives in villages and in rural areas. They also
organize many programmes concerning agricultural inputs, processing,
storage and marketing, as well as awareness seminars on the benefits of
forming co-operatives with the funds for development activities, go-
downs, processing units, etc. An example of just such a governing body
is the National Co-operative Development Corporation.

  Here, regulatory bodies control the working of the corporate, fair
business practices shareholders’ meetings, the misuse of funds collected
from shares, etc. These organizations regularly inspect the companies’
accounting practices, and maintain the minutes of meetings conducted
by them-two examples of corporate regulatory bodies are SEBI and

Problems of Co-operatives & their Remedies

In spite of a historical record of co-op movement, still we are facing problems
which have hampered the development.

1.       Government influenced: Recent years have shown an increasing
     interference of the government by imposing restrictions, which has seriously
     hampered the democratic function. Further the corrupted political ideas have
     taken co-operatives as their personal kingdoms, which has seriously hampered
     the purpose of co-operative movement. Government has practically influenced
     the co-operative movement as the major parts of the financial assistance still
     come from the government and therefore it has not really reached the peoples

2.      Political Influence: The political influence and pressure on officials in day
     to day function granting of loans to undeserving people, corruption amongst
     officials is sickening the co-operatives. The political interference and
     administrative high handedness has been the root cause for loosing the purpose.
     Further growing vested interests, ineffective federal structure and reliance on
     government shows the dependency which is coupled with the processing
     handled by several departments, lack of co-ordination and export guidance have
     together arrested and influence co-operatives.

3.      Bureaucrats on deputation: Appointment or deputation of government
     officials has proved to be harmful as well as anti-democratic. Further these
     bureaucrats are more rules bound and less business like in order to complete the
     procedures they sacrifice the business opportunity. The expenditure incurred for
     these bureaucrats are much more and acts as a financial burden because equally
     qualified people can be recruited at much lesser cost from the open market.

4.      Problems of deduction: A pathetic state of socio-economic structure,
     poverty and illiteracy has been a reason due to which the members fail to elect a
     leader who is wise, efficient and capable and therefore a leader from outside
     becomes the only choice. The co-operative movement has concentrated more on
     providing or rather than on the allied infrastructure, which would have made the
     co-operative movement more profitable and served the fundamentals purpose of
     economic upliftment of the members. It was recommended by all India Rural
     Credit Survey report of 1954 that it is necessary to have an integrated scheme of
     co-operative development rather than merely or co-operatives.

5.      Confined to Credit Co-operatives: The Co-operative Credit Society has
     been providing loans only for agricultural operations and did not extend loans
     to meet the other requirements of the farmer because of which they had to
     depend on the moneylenders and the resulting exploitation thus it could not be

6.     Small size: The primary agricultural co-operatives have been very small with
     a limited area of operation but the liability has been unlimited. Also the
     honorary workers were expected to work much more which adversely affected
     the successful working of co-operatives.

7.     Management in wrong hands: Management of most of the co-operatives
     has been in the hands of the illiterate, ignorant and untrained people who were
     unfit for the work entrusted on them.

8.      Conflict within societies: Intra society conflicts have also been a serious
     retarding factor. Under these circumstances a society will either not do much
     work or favoritism and hypnotism would play the role in controlling the funds
     and in the process restricting the funds to few favored members.

9.      Excessive over dues: A major problem of many societies is a high
     percentage of outstanding and low recovery rates.

10. Unproductive loans: Large loans have been given for unproductive purposes
   and that too the people who have concealed or hidden their own debts. The
   management has also been reluctant to take action against the defaulters.

11. Lack of funds: The main problem of the co-operatives is lack of funds. This
   is because the members do not save or deposit enough of their savings to
   contribute to the working capital of the organisation. Besides, there is also lack
   of response from general public. Hence, most co-operatives organisations fail
   to attract the desired deposits.
12. Lack of professionalism: The co-operative sector is still an underdeveloped
   sector of the Indian economy. Under the 5-year plans, keeping in mind the
   ultimate socio-economic goals, appropriately enough with state recognition
   guidance a number of co-operatives were set up. While the quantitative
   coverage on account of government support, one can come across very few
   well-managed, large-sized and modern co-operatives. Due to the lack of
   professionalism, growth and development is hampered in the face of the
   changing management scenario in the country.

13. Problem of Member Involvement: Many co-operatives have a problem of
   lack of member involvement. This is because of the indifferent attitudes of the
   members. Also the principle of unlimited liability prevents people from joining
   co-operative organisations. Hence, co-operatives organisations fail to involve
   the desired the number of members.

14. Illiteracy: In India, people have been highly illiterate, ignorant and extremely
   conservative towards co-operative organisations. This is because people fail to
   understand the real meaning and objectives of co-operation.

15. Dual Control: Let's take an example to explain this point. The Registrar, who
   is a representative of the state government and also the Reserve Bank of India,
   controls co-operative banks. Similarly all other co-operatives have dual
   control. There is no one fixed line of hierarchy. This is a problem because if
   one employee has two bosses, he has twice the problems.

16. Problem of Diversification: It must be approved that co-operatives in India
   exhibit excessive sensitivity towards memberships and other aspects of the
   organisation and pay little attention to exploring new areas of diversification.
   This is a serious problem.

17. Traditional society: This is another problem for co-operatives. This is
   because most of the villages or small towns where co-operatives operate have
   members who are very traditional and conservative. Even in the competitive
     scene in India, it is becoming more and more difficult for co-operative to
     function efficiently on the basis of traditional type of management.

18. Over-riding powers to Registrars: This is again a very serious problem for
   co-operatives. The registrar being a representative of the State Government has
   been given a lot of powers. Due to rising corruption, these powers are misused
   to a large extent, thus posing a problem.

Other problems include:

1.     Unemployment

2.     Poverty

3.     Lack of Infrastructure

4.     Unequal distribution of wealth and resources

5.     Low per capita income

7.     Religion fundamentalism

8.     Regionalism

10. Population Explosion

11. Corruption


1.      Strengthening of human resources: The deficiencies and limitation in the
     recruitment and training should be removed. Competent persons and individuals
     with a capacity and unquestioned integrity should be posted on the various
     responsible positions.

2.       Avoiding political influence: Groupism, class-consciousness, political
     interference, which normally plagues should be avoided.
3.     Improved recovery: It is necessary that the loans and credit facilities should
     reach the poor farmers and those who have taken the undue advantage should
     be made to repay it, at the same time it should also be avoided to write-off loans
     unless absolutely necessary and justified.

4.      Developing a sense of solidarity: It is the most essential aspect necessary for
     the growth of co-operatives. If there is no solidarity among the members it will
     definitely affect the functioning and prosperity of the co-operatives but might
     also face unforeseen adversities.

5.     Public Contribution and participation: It is very much necessary that the
     co-operatives should become self-funding rather than on government finances
     and subsidies. It should have more of public contribution and participation.

6.      Effective leadership: The co-operatives being a people’s movement must
     ensure that the officers and the leaders should have and must acquire necessary
     training to run the co-op movement more effectively as these members will be
     the ones who will be able to do justice towards the cause than any outsider.

7.       Multipurpose basis: The old objective, of keeping the co-operatives
     confined to providing credit has to undergo a change. It is necessary to expand
     into an allied and infrastructural service as per the purpose of the co-operatives.

8.      Production plans: In addition to the primary function if the co-operative
     aims at expanding, improving and deciding the agricultural production it can
     help the villagers to specialise and pool in their resources to increase the total
     production and thereby achieve scale of economics.

9.      Marketing and processing: After supplying credit and producing goods the
     co-operative movement has often faced failure because of inadequate and
     improper processing and marketing infrastructure and therefore this also needs
     to be developed.

10. Professionalism: The solution for lack of professionalism could be that the
   co-operative organisation must adjust by adopting new management techniques
   to meet the demands.
11. Diversification: The solution could be that co-operative organisations should
   introduce new products, new processes new techniques and tools of
   productivity etc. to build up its strength in the market and maintain it on a
   continued basis.

 It can be inferred from the above points that a Co-operative organization function
on lines similar to those of a corporate organization. However, a few differences
exist between the two. If all Co-operative organizations follow a professional
approach like corporate, they can succeed at being successful models of
organization to bring about dynamic changes in our economy.

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